Restatements Pack Less of a Punch

Financial restatements aren't the tempests they used to be. The average restatement cost companies just $3.2 million last year, reflecting the smallest hit to company earnings in seven years, according to a study by Audit Analytics.

That figure is less than half of the average $6.5 million bite out of earnings that restatements took in each of the previous six years. Some 53% of all public- company restatements had no impact at all on earnings last year—a seven-year high.

Complex areas of restatements, such as income taxes and hedging activities, "are gradually coming down," said Peter Bible, a former chief accounting officer at General Motors and current chief risk officer at EisnerAmper LLP, an accounting firm.

Regulators at the Securities and Exchange Commission have also been filing fewer accounting- fraud cases, reducing companies' restatement risks. But that could change as the agency's new Financial Reporting and Audit Task Force already has several new investigations under way, SEC Chair Mary Jo White said last month.

Even so, some restatements still cause major hits to earnings. The biggest restatement announced last year came from Quicksilver Resources Inc., an oil and gas company, which posted a $420 million hit after the company changed its accounting practice with regard to derivatives. Hartford Financial Services Group, an insurance and financial-services company, came in second, reporting a $388 million earnings hit after it recalculated the impact of selling its life-insurance arm.

Revision restatements, which are small enough to be considered immaterial, rose relative to other restatements. Those revisions made up 69% of all restatements last year, their greatest portion since 2005, according to Audit Analytics.